Encouraging renting

Monthly Archives: January 2011

In England and Wales every landlord who has taken a deposit in connection with a new or renewed Assured Shorthold Tenancy (AST) since 6 April 2007 has been required by law to protect that deposit using a Government backed tenancy deposit protection (TDP) scheme.

In Scotland on the other hand no such requirement currently exists.

As is the case with a great deal of regulation, TDP was not universally welcomed by the landlord community in England and Wales. The overwhelming view was that as the majority of landlords would only ever withhold money in relation to legitimate damages or loss the problem was a relatively minor one.

At the time the NLA recognised that a small number of landlords did on occasion fail to return some or all of their tenants’ deposit, leading to dispute. But considered a mandatory TDP scheme an overreaction to a small problem. Frankly, we thought that there were more appropriate ways to improve the dispute resolution process.

However, during the passage of the Housing Act 2004, it became very clear that the Government could not be dissuaded from introducing TDP – leaving the NLA with a difficult choice to make. Should we continue to protest the establishment of TDP, knowing that we would not succeed in blocking its introduction? Or should we indulge in some lateral thinking and try to find a way to limit the potential damage to landlords.

The path we chose invited quite a lot of criticism, but was the only option which allowed landlords a degree of flexibility.

Rather than sit back and allow the original plans for a custodial only scheme to proceed. We decided to focus our efforts on ensuring that landlords would have a choice between paying all deposits over to a custodial scheme or using an insurance backed product to retain the deposit for the length of the tenancy.

We believed so strongly that this was the only fair way to proceed that we decided to sponsor a proposal, which later became one of the three Government approved schemes (my|deposits) and the only insurance based scheme designed specifically for landlords.

Which is why we are so concerned by the Scottish Government’s recent announcement that it intends to proceed with TDP.

No potential provider of TDP has as yet gone public, and some of the details are still sketchy, but the draft legislation outlines the following:

• Provisions are only made for a custodial scheme. Removing the option available in England and Wales for landlords to hold on to deposits for the duration of the tenancy having used an insurance backed scheme.

• The scheme, or schemes, must be free for landlords and tenants to access.

• Dispute resolution must be provided at no cost to landlord or tenant.

• Landlords will have 30 days to protect a newly received deposit and notify the tenant

It also seems that, unlike South of the Border, landlords will be required to protect existing deposits within nine months of the scheme becoming operational.

Given the Scottish Government’s inability to implement and appropriately enforce private-landlord registration, the NLA is at a loss to understand why they should further extend themselves by embarking on a scheme of the magnitude of TDP.

While the NLA recognises the professionalising impact that TDP has had south of the border in relation to bringing tenancies to a close in an orderly fashion, we believe that politicians should concentrate on sorting out the mess of registration before committing to new regulation.

If the Scottish Government are committed to implementation of TDP in the near future then it would be grossly unfair to provide fewer options to Scottish landlords than are available to their English and Welsh counterparts. As such it is crucial that landlords be able to choose between custodial and insurance backed options. To do otherwise would risk putting Scottish landlords at a further disadvantage.

Beyond simple unfairness, it would introduce a great deal of confusion for Scotland to operate TDP on an entirely different basis to England and Wales. It would also increase administration and operating costs significantly for those landlords active in both market places. Surely no-body benefits from this?

Like this:

We’re told that 2011 will be all about localism. Which is great, local people dealing with local problems in a local way.

However, not everything can be considered in isolation without taking into account the wider context. In the same way that very few housing issues can be viewed without reference to wider social factors.
This kind of lateral thinking is particularly important when you consider the growing number of local authorities attempting to manipulate the housing market in their catchment using new and extended powers. Of course this is nothing new, planning decisions have long controlled the available supply of housing, targets have influenced the type of units built and infrastructure has determined who wants to live where. But the latest moves by some local authorities seem slightly different.

Using part of the Town and Country Planning Act, a few local authorities including Portsmouth and Manchester to name two, are trying to require all landlords wishing to establish a new small HMO obtain planning permission before agreeing a tenancy.

These ‘Article 4 Directions’ effectively roll back housing policy to a pre-election stage, before the Coalition granted permission across the board for small shared houses, whereby households of three or more unrelated people can only share a home (which had previously housed a family) if permission is granted by town hall.
Ideological matters aside, this kind of policy – assuming the requirement is subsequently used to limit the number of HMOs in a town – is likely to have some pretty far ranging consequences.

The individuals who live in shared houses are a varied group drawn from a variety of backgrounds – key workers, students, migrant workers, recent graduates and vulnerable adults. But the one thing they are all likely to have in common is a very limited housing budget. Unsurprisingly, this means that they are unlikely to be able to move to another type of property.

This type of devolution of authority to local councils cannot be done without also shifting responsibility for decision-making.

Which will present local authorities with a number of very difficult questions.

If local communities do not want shared housing in their back-yard that is their right. But I am far from confident that the people making the decisions locally have considered all of the consequences of barring sharers from local communities, whether they are nurses, students, teaching assistants, street cleaners or shop assistants.

If a person on a low income cannot afford to buy or rent a self contained home of their own, and the option of sharing a safe, secure home with others is removed. Where are they supposed to live?

If they cannot live locally, what happens to the local companies they work for? What will happen to the local businesses which rely on them to stay afloat?